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  • rmacculloch
    • Jun 21, 2023
    • 2 min read

An inconvenient truth about capital gains taxes that Labour and the mainstream media covered up

The Attorney General David Parker presented the Inland Revenue "High Wealth Individual Research Project" to a gullible mainstream media that swallowed the political purpose of the report hook, line and sinker. For example, the NZ Herald did a video to explain to its readership of several million Kiwis that the reason why the "super rich" are paying an effective tax rate of 9.4%, compared to 20.2 % for middle earners, is because the wealthy get their "economic income" mostly from capital gains which are not taxed in NZ.


If economics was only that simple. The conclusion our Attorney General, Revenue Minister & Herald jumped to was wrong, at least if you compare our IRD survey with a similar one commissioned by the White House. It concluded that the wealthy in America are paying an effective tax rate (measured in a similar way as the NZ IRD survey) of 8.2%. That survey was referenced in the IRD report which states, "The approach we take is similar to recent work undertaken by the US Council of Economic Advisers that estimates effective tax rates for the 400 wealthiest US families".


Spot the problem? The US has a comprehensive capital gains tax that even includes the family home (which David Parker has declared, "I have never favored"). Yet the effective tax rate of the wealthiest Americans is less than ours (!) A reason, according to the White House, maybe that whilst realized capital gains are taxed in the US, unrealized ones are largely not - a policy also recommended by our Labour government's Cullen Tax Working Group.


So if you think a capital gains tax, as designed by Labour, will increase the Effective Tax Rate of "the wealthy" - which was the conclusion of our media & NZ's "top tax experts" that it consulted - dream on. What is behind the Revenue Minister's crusade? Nothing short of stirring the green-eyed monster of envy as a ploy to gain votes & power.


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  • rmacculloch
    • Jun 21, 2023
    • 2 min read

Labour Turns on the Immigration Tap which Stuart Nash said we "could not afford to turn on".

Today Immigration Minister Woods announced a further loosening of immigration criteria, even though immigration is already hitting record numbers. On 17 May 2021, then PM Ardern said the government was using Covid-19 as an opportunity to reconsider areas such as immigration. The Labour government’s immigration policy, after initially being elected to power in 2017, was to reduce net migration by about a third – cutting 20,000 to 30,000 migrants from the then total of about 73,000.


“When our borders fully open again, we can’t afford to simply turn on the tap to the previous immigration settings,” the Minister, Stuart Nash, said in May 2021, & signaled "sweeping changes" ahead for immigration. "The pressure we have seen on housing & infrastructure in recent years means we need to get ahead of population growth", he said.


This year net migration to NZ is projected to hit 100,000, exceeding the heights achieved under the previous National government. I'm absolutely in favor of immigration to fill skill-shortages in a country - which is part of "supply-side" economics. But that is not what is going on in NZ now. The government is terrified of a deep recession in this election year and is desperate for demand to surge - it has little to do with plugging skill gaps.


Wood's further loosening of immigration settings is a declaration by Labour that its dream of NZ being a high-wage, high skill economy is over. The party was unable to fix education. Our children's skills now languish, teachers are on strike and the tertiary sector is in retrenchment. Labour, with Chris Hipkins as education minister, never educated a new generation of Kiwis these past five years to plug skill gaps. Instead the Party sold out. It gave up. The game now is a desperate attempt to keep GDP going by importing people.


Many years ago Graeme Wheeler, when he was Reserve Bank Governor & Key was PM, came to speak to my economics class. He showed how the Kiwi economy was being driven by three things - immigration, tourism & construction. I can't speak for Wheeler, but I suspected he disapproved, as it made us dependent on the rest of the world.


So what has become Labour's economic "strategy"? Its now a carbon copy of John Key's. It is not about raising domestic skill & efficiency levels - it amounts to an abandonment of domestic structural reforms aimed at getting our children & nation working better. It is the Kiwi equivalent of an IMF bailout. It is the white flag of surrender. It is about begging tourists, migrants and a motley crew of property developers to save us since we can't save ourselves.


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Robert MacCulloch

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